Top cryptocurrency news: Fed will release long-awaited guidelines for granting master accounts to cryptocurrency banks
The Federal Reserve Board of the United States announced on Monday that it has finalized its guidelines for the factors reserve banks must consider when reviewing requests for Federal Reserve accounts and payment services.
The guidelines provide a three-tiered review system, with the amount of due diligence provided based on the risk level of the application.
The guidelines were initially suggested in May 2021, with a supplemental proposal posted in March, and the final recommendations, which comes into effect after publication in The Federal Register, are "essentially comparable."
In a statement, the Fed stated that “banks that participate in innovative activities for which authorities are still creating adequate supervisory and regulatory frameworks will be subjected to a more thorough scrutiny.”
Nonetheless, the framework was revised to give more equal treatment to non-federally insured institutions authorized under state and federal law. Non-federally insured institutions incorporated under federal law but lacking a holding company subject to Federal Reserve monitoring will face the most harsh scrutiny. To use the global payment systems, financial institutions must have a Federal Reserve account.
The Fed's delayed approach to allowing crypto banks access to Federal Reserve accounts, sometimes known as "master accounts," has long irritated crypto bankers. Wyoming passed legislation in 2019 to enable "blockchain banks." In June, Wyoming-based digital asset Custodia Bank filed a lawsuit against the Federal Reserve Board of Governors and the Federal Reserve Bank of Kansas City, saying that the 19-month wait for a master account exceeded the legally mandated response time restrictions.
The Lummis-Gillibrand Responsible Financial Innovation Act would establish guidelines for the Federal Reserve's replies to master account applications.
In a statement, Federal Reserve Bank Governor Michelle Bowman cautioned that the new standards are merely the first step in providing a transparent process. There is a risk that this publishing may create the impression that evaluations will now be done on a more expedited schedule.
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